Jonathan Fowlie, Vancouver Sun
VICTORIA – The harmonized sales tax comes into effect in British Columbia today, driving up prices for select goods and services and sparking confusion for many about exactly what the new tax will cover.
For consumers, the HST will mean an immediate increase in the cost of an array of items, including haircuts, bicycles, restaurant meals and health club memberships. All of these increases come because several items that had been excluded from the provincial sales tax will now be subject to the new broader 12-per-cent HST.
The HST combines the now-defunct PST with the federal GST to make a single tax on goods and services. The tax will be collected by the federal government, which will regularly pay the province its share of the combined levy.
On Wednesday, Premier Gordon Campbell agreed that prices of some goods and services will increase in the short term, but said the tax will ultimately mean more jobs, increased investment and a better economic outlook for all of B.C.
“British Columbia will become one of the most competitive tax regimes in the world and will be a place where people want to invest to create jobs in literally every region of this province,” Campbell said Wednesday.
For Campbell, the HST has been a political albatross, dragging his B.C. Liberal government to dramatic new lows in the polls. On Wednesday, the three-term premier acknowledged the public anger, saying he believes it mostly comes from the fact the tax came “out of the blue” after the last election.
But Campbell said he believes opposition to the HST will deflate once people begin to pay the tax, see how it affects family budgets and understand how it can benefit the province.
“There’s a savings for businesses across the province of about $150 million, and those savings will be passed onto consumers,” he said.
David Schlesinger, head of indirect tax at KPMG, said theory suggests the cost of services will eventually fall as business costs are reduced, and the savings are passed on to consumers.
But, he said, that doesn’t necessarily ease people’s minds, especially given many are still confused about how the tax will work.
“The truth is, most people don’t know exactly what is subject to the new tax and what isn’t,” he said.
“But it’s the items that people spend on regularly where they’re really going to see the difference.”
To help ease the burden of the HST on low-income earners, the B.C. government has introduced a quarterly HST credit, which it will start paying on July 5.
Individuals with incomes of $20,000 or less will receive an annual HST credit up to $230. Families with incomes up to $25,000 will receive an annual credit up to $230 per family member.
The rebates will be in addition to the existing GST credit now available to those with low and modest incomes.
The government has also increased the basic personal tax credit for all British Columbians to $11,000, a move it said will put $80 back in the pockets of individuals, and up to $160 for those claiming spousal credits.
New Democratic Party leader Carole James said that despite these measures, the HST is the wrong tax for B.C., especially given the province is just now shaking off the effects of a global recession.
“At a time when we need to encourage consumer confidence in order to keep our economy growing, we’re bringing in a tax that’s going to slow down consumer confidence,” she said.
“I’m concerned it’s also going to have a huge impact on service-based industries that we need to encourage to diversify our economy, so the restaurant industry, the tourism industry and small businesses,” she added.
email@example.comWith files from Canwest News Service
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